MVL Season 2019

MVL Season – 2019

March is traditionally the month of the year when the number of members’ voluntary liquidations (MVLs) is at its highest.  The procedure results in returns to shareholders being made, either as surplus cash or as other assets owned by the company.  For UK residents, these are treated as capital distributions, subject to the capital gains tax rates rather than dividend or income tax rates.  (Many individuals may also qualify for Entrepreneurs’ Relief). By liquidating at this time of year it allows the shareholders, if UK individuals, to take advantage of two tax years’ worth of annual capital gains tax exemptions, without having to wait long periods between distributions.

While it is easy to ‘sell’ MVLs to individual shareholders through the tax benefits, there are good reasons for placing a company at the end of its useful life into MVL, even if the shareholders are corporate and/or foreign entities, and are as such unlikely to see the same obvious tax benefits.  Here are five:

1. A liquidator will be appointed to wind down the Company’s affairs, saving the time and costs of the director administering the winding down of a Company that will otherwise have ceased.

2. The liquidator will be licensed, qualified, and independent, and will therefore ensure the funds and assets are dealt with and distributed between creditors and members correctly.

3. There are statutory requirements for a liquidator to seek claims publicly from any potential creditor, and set a deadline for claims to be received.  This will significantly reduce the risk of claims appearing long after the Company has been dissolved.

4. The liquidator will correspond with HMRC through dedicated teams, ensuring all pre-liquidation tax affairs are up to date, and getting confirmation that no matters or queries are outstanding.

5. At the conclusion of liquidation the process of dissolving the Company will occur automatically. There is no additional process, or fee for dissolution.

Even without the tax benefits, it is prudent to advise clients to place companies that are finished with into MVL (unless there are less than £25,000 of distributable reserves), even if the shareholders are foreign or corporate entities.  For directors, it is prudent to recommend shareholders pursue an MVL route, rather than try to wind down the company themselves.

At WSM Marks Bloom we have three Licensed Insolvency Practitioners ready to discuss the MVL procedure with directors and shareholders.  Give us a call at WSM’s Kingston Office on 020 8939 8240 or email insolvency@wsm.co.uk, and an expert will be ready to assist you.